Monday, July 09, 2012

Environment - "Ethanol producers feeling pinched"

A lengthy article by Ameet Sachdev of Chicago Tribune looks at the problems affecting the producers. A sample:

"There's a lot of uncertainty in the market," said Sean Hill, an industry economist with the U.S. Energy Information Administration. "The industry is dealing with a lot of moving parts."

At the moment the industry is caught in a classic squeeze. Cash corn prices are trading at abnormally high levels because of dwindling supplies. Farmers are being cautious in making sales of corn because the record-high heat and drought that's scorched the Midwest could hurt their yields in the fall.

At the same time, ethanol prices have faded since the beginning of the year because of falling gas prices. Ethanol follows gas prices pretty closely. Ethanol demand also has dropped because of decreasing exports.

The squeeze became so severe at Valero's plants in Albion, Neb., and Linden, Ind., that it was costing the company more to make ethanol at those mills than it could sell the fuel for, said spokesman Bill Day. The move comes amid drought conditions in both states.